Churches
It
seems sacrilegious to talk about churches in terms of markets and the prices
they bring. Money is secular. Churches, temples, synagogues, and mosques
are holy. Holy and secular don't mix. But, on the other hand, churches
are bought and sold every day. They are sold for money. When they are,
their owners need advice about value as much as anyone.

The position of churches as buildings is different today from what it
was in an earlier America. Once, no one needed to ask where the church
was. You just went to where all the roads came together and looked for
the steeple. Today, churches may be physically overshadowed by multi story
buildings. A church may be out in the woods. It may be a storefront. It
may be a chapel in as incongruous a place as the strip in Las Vegas. Older
church buildings are re used as apartments, artist lofts, karate studios,
and restaurants. New congregations find homes in old schools and offices.
Congregations compete for space in the market as part of the general "mix."
Churches were once built at great cost, as a statement of reverence, with
arches that reached toward the heavens and masonry to last forever. Beautiful
stonework and finely hewn beams can add to value for churches and for non
church uses. But, at other times, those same things that make a church
so full of meaning can impede its value: don't most of us feel at least
a little uncomfortable with the thought of dinner on what once was the
altar?

The traditional method of valuation for a church, as for other special
use property, is the Cost Approach. Calculate what it would cost to build
the building, deduct depreciation, and add land value. But how do we measure
depreciation? And what does it matter if it costs a million dollars to
replace a building when none of the brokers in town can seem to fetch offers
of more than half that? The Cost Approach is in disfavor in the valuation
of commercial buildings because it typically produces value indicators
well in excess of what buildings sell for. Cost today is considered indicative
primarily in the valuation of new buildings in healthy markets. If cost
is not indicative in the valuation of offices or industrial buildings (which
are generally not worth what it costs to build them), why should we expect
it to be any better in the valuation of churches?

A good method for the valuation of a church is to begin by answering
those things that can be answered. What is the land worth? That should
provide a floor. What does it cost to build it? That may give us a ceiling.
Beyond that, what special elements may produce value? Is there a source
of rental income? Weekday parking on site for a nearby commercial building
that needs it? The basement, for a day care center? The steeple, to house
a cellular dish? Can the building find a market for re use, as general
"shell" space? What is space of that kind worth? Last, how does
it compete in the market of churches? Once, data of this kind were difficult
to obtain. Today, a brief search through a data service provides region
wide information of church sales. Appraisal Data Source reports a range
of prices in Greater Boston in recent sales from $18.00 to $77.00 per square
foot of building. Given the range, where does our property fit?

The skill of an appraiser in the analysis of a church is in making a
clear picture of potentially diverse data. It may be important to communicate
to a client that the price a church will bring cannot be predicted with
the same precision as the price of a house or a rented building. The value
of a church as real estate, in fact, may depend on the value of all those
things to which it may be converted. To value a church can mean keeping
an open mind to a broad range of possibilities.

Eric T. Reenstierna, MAI

The Reenstierna Associates Report is published as a service to the clients
of Eric Reenstierna Associates and other real estate professionals. The
views expressed are those of the articles' authors and do not necessarily
reflect those of other members of the organization. Copyright 1996. All
rights reserved.